Divide the CEO’s annual total compensation by the median employee’s annual total compensation for the same reporting year. A result of 121 means the CEO’s disclosed annual total compensation was 121 times the median employee’s disclosed annual total compensation: a ratio of 121:1. Before comparing that figure with another company’s, check how each company selected its median employee and calculated compensation. The ratio is a disclosure-based comparison—not a measure of equal purchasing power, cash received, or equity value ultimately realized.
What the CEO pay ratio tells you—and what it does not
The CEO-to-median employee pay ratio compares two annual total compensation figures: one for the chief executive officer and one for the employee identified as the company’s median employee. If the figures are $7 million and $60,000, respectively, the ratio is about 117:1. It does not mean every employee earns the median amount, nor does it show the gap between the CEO and a typical employee in every job, location, or part of the workforce.
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The ratio is most useful as a compact description of a company’s disclosed compensation figures for a particular reporting period. It becomes less useful when treated as a stand-alone verdict on fairness or as a precise comparison between employers. Workforces, pay structures, periods, and calculation choices differ. The company’s own explanation is essential context, not fine print.
Keep three ideas separate when reading the figure. First, the ratio is an arithmetic relationship between two reported annual totals. Second, the identity of the median employee depends on the issuer’s disclosed process for selecting that person. Third, the compensation totals are disclosure figures, which may include equity values and need not equal cash paid or the value an executive ultimately realizes. A ratio can be correctly calculated and still have limits as a comparison.
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How to find and calculate the ratio
- Open the company’s proxy statement or annual meeting materials. Look for a section titled “CEO Pay Ratio” or similar. The cited company filings provide the ratio and supporting annual compensation figures in their proxy materials. You can use the document’s find function to search for “CEO Pay Ratio.”
- Write down the reporting year. Confirm the fiscal or reporting year covered by the disclosure. The CEO and median employee amounts must refer to the same period; do not combine figures from different years.
- Record both annual total compensation amounts. Use the CEO’s disclosed annual total compensation and the median employee’s disclosed annual total compensation. Do not substitute the CEO’s salary alone for the CEO’s total.
- Divide the CEO amount by the median employee amount. For example, $7,471,923 ÷ $61,782 = about 120.95. Rounded to a whole number, that is 121:1.
- Read the methodology explanation before interpreting or comparing the result. Note the employee population, measurement date, compensation measure used to identify the median, annualization, exclusions, estimates, and assumptions the company describes.
The calculation above matches the reported 121:1 ratio in a company’s 2025 proxy statement for 2024. That filing reports CEO annual total compensation of $7,471,923 and median employee compensation of $61,782. It says the company identified its employee population as approximately 11,650 employees as of November 30, 2024, and used annualized base salary to identify the median employee. Read the 2025 proxy statement’s 2024 CEO Pay Ratio disclosure.
Check the arithmetic and the units
Both inputs should be annual compensation amounts expressed in the same currency. The ratio is dimensionless: dividing dollars by dollars leaves a number, which is conventionally written as “X:1.” Keep sufficient decimal places while checking the division, then follow the precision used in the company’s reported figure when presenting it. A small difference between your calculation and the disclosed ratio may reflect rounding; a larger difference is a reason to recheck that you copied the correct year and figures.
For the example above, dividing $7,471,923 by $61,782 gives approximately 120.95. The quotient is the number of median-employee compensation amounts represented by the CEO’s disclosed total. It rounds to 121, so the ratio is written 121:1. The “:1” makes the comparison explicit: one side is the CEO’s annual total and the other is one median employee’s annual total.
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Do not divide the CEO’s salary by the median employee’s total compensation, or divide the CEO’s total by a median salary figure that is not the disclosed annual total compensation amount. Those calculations mix different measures. If a filing supplies the reported ratio but does not provide enough detail for you to reproduce it exactly, state the reported number and describe the limitation instead of filling in missing inputs.
What company disclosures show
Three 2025 proxy statements illustrate how widely the reported figures and methods can differ. These examples describe individual issuers; they are not a representative sample or an industry benchmark.
| Disclosure | Reported ratio for 2024 | CEO annual total compensation | Median employee annual compensation | Method or qualification reported |
|---|---|---|---|---|
| 2025 proxy statement, “2024 CEO Pay Ratio” | 121:1 | $7,471,923 | $61,782 | Approximately 11,650 employees were in the population as of November 30, 2024. Annualized base salary was used to identify the median employee. |
| 2025 proxy statement, fiscal 2024 | 0.77:1 | Not stated in the cited disclosure summary | Not stated in the cited disclosure summary | Full-time, part-time, and seasonal associates were included. Full-time employees who had not worked the entire year were annualized. |
| 2025 proxy statement, 2024 | 48:1 | $11,395,756 | $238,703 | The company cautioned that disclosed values—particularly equity-award valuations—may not match the actual economic benefit ultimately received. |
A ratio below 1:1, as in the second example, means the disclosed CEO annual total compensation was lower than the disclosed median employee annual total compensation under that company’s calculation. It is an example of a reported result, not evidence that ratios below 1:1 are typical or directly comparable with higher ratios.
The examples also show why the ratio should travel with its supporting details. The 121:1 filing names a measurement date and says annualized base salary was used to identify the median. The 0.77:1 filing describes the types of associates included and says certain full-time employees’ compensation was annualized. The 48:1 filing gives both compensation amounts and cautions about the interpretation of disclosed equity values. These facts help explain what each figure means; they do not establish a single standard workforce or a typical result.
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Do not treat the examples as a ranking that answers which company pays its employees better. The median amount, CEO amount, workforce composition, and calculation approach all matter, and the filings concern different issuers. The examples are useful for illustrating disclosure practices and arithmetic, not for drawing a population-wide conclusion.
How to compare two companies responsibly
Start with companies reporting for the same fiscal year where possible. Then compare their methods alongside the ratios. If an important detail is absent or unclear in either filing, treat the comparison as limited rather than assuming the companies used identical rules.
Check who counted as an employee
Look for which full-time, part-time, seasonal, temporary, domestic, or international workers were included or excluded. A company with a different mix of locations, job types, or employment arrangements may have a different median even if its compensation practices are otherwise similar. One 2025 proxy statement, for example, says it included full-time, part-time, and seasonal associates. Another describes an employee population of approximately 11,650 as of a stated date. Those details affect what each company’s median represents.
Population scope is important because the ratio’s denominator is tied to the employee population used to identify the median. If one issuer includes categories of workers that another excludes, the two medians may represent different groups. Record the categories the company says it included and any disclosed exclusions. If the explanation does not make a category clear, do not silently assume it was counted.
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Check the date and period used
Find when the company selected or measured its median employee and which compensation period it used. A measurement date is not necessarily the same thing as the reporting year shown in the ratio’s label. Compare like periods where possible, and make any mismatch explicit rather than putting the numbers side by side without qualification.
For instance, the 121:1 example concerns 2024 and describes a population of approximately 11,650 employees as of November 30, 2024. The reporting year and the population measurement date answer related but distinct questions: the former tells you which period the reported ratio covers, while the latter tells you when the company identified the employee population for its calculation. Include both where the filing provides them.
Check how the median employee was identified
The measure a company uses to locate the employee at the midpoint may differ from the final annual total compensation figure used in the ratio. For example, one filing says annualized base salary was used to identify its median employee. Other possible measures described by issuers include wages or gross earnings. Read the explanation rather than assuming the median was selected using the same compensation definition as the final ratio.
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This distinction matters when comparing the median employee’s selection process with the reported denominator. The measure used to sort or identify employees is a methodological choice; the final disclosed median employee annual total compensation is the amount used in the ratio. Do not label the base-salary measure in the 121:1 example as the final compensation figure—the filing separately reports the median employee compensation as $61,782.
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Part-year employment and other circumstances may lead a company to annualize compensation, use estimates, apply exclusions, or reuse a previously identified median employee. Record the choices the issuer actually describes. Do not infer that a company used an adjustment—or did not use one—when its disclosure does not establish that fact. A 2025 annual report by MongoDB, Inc. also cautions that methodologies, exclusions, estimates, assumptions, employee populations, and compensation practices can differ between companies. See MongoDB’s 2025 annual report disclosure.
The 0.77:1 example provides a concrete annualization detail: the filing says full-time employees who had not been employed for the entire year were annualized. That is not a statement that every issuer uses the same treatment. It is a reason to inspect the explanation in each filing and to note the difference when it could affect the comparison.
Exclusions and estimates can also affect the population or the figures used in a calculation. The appropriate interpretation is issuer-specific: report what the filing says, and distinguish disclosed facts from what you cannot confirm. A missing detail is not proof that the company took no adjustment or that its process matched another issuer’s.
Ask what the compensation total represents
Annual total compensation is not necessarily the same as cash paid during the year. It can include equity-award valuations. One company’s 2025 proxy statement explains that values disclosed in the required manner may not correspond to the actual economic benefit an executive eventually receives, particularly for equity awards. That distinction matters when someone interprets a ratio as a comparison of cash in hand. Read the filing’s explanation of disclosed compensation values.
The company’s filing states: “The values shown below are disclosed in the manner required by SEC rules, but in certain cases, particularly with respect to the valuation of equity awards, the values shown may not correspond to the actual economic benefit that will be received by the applicable executive upon receipt of the applicable compensation.” This is a company statement in its proxy filing, not a statement authored or endorsed by the SEC. It is a useful reminder to describe the inputs as disclosed compensation values rather than cash received or realized benefit.
The denominator and numerator also describe different people and compensation circumstances. The median employee’s pay is not a representation of every employee’s pay, and the CEO’s disclosed total is not necessarily what the CEO received as cash. For either amount, use the description given in the filing and avoid restating it in a way that makes it sound like take-home pay.
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Why a simple ranking can mislead
A league table makes ratios look as if they were calculated on a common basis. The cited company disclosures themselves warn that methods, exclusions, estimates, assumptions, employee populations, and compensation practices can vary, making ratios potentially non-comparable. A ratio may also reflect workforce composition and the employee measurement approach, not just the CEO’s pay or the company’s pay practices in isolation.
One 2025 proxy statement says, “As a result, our pay ratio may not be comparable to the pay ratio reported by other companies.” Attribute that sentence to the company’s proxy statement. It is a company’s explanation of its own disclosure, not an individual speaker’s quotation or a regulator-authored statement.
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A ratio can change because the CEO’s disclosed total changes, because the median employee compensation changes, or because the group and approach used to identify that median differ. The single number does not explain which factor accounts for a difference between two issuers. That is why a side-by-side comparison should include the two inputs and the key methodology notes, not just the ratios.
For a useful comparison, show each ratio with its reporting year and a short explanation of the most consequential methodology differences. If the methods or populations differ substantially, say that the figures are not directly comparable. Do not label one company’s result “typical,” or call a ratio an industry average, based on a handful of filings: the examples above cannot establish a population-wide benchmark.
A practical way to present your comparison
If you are writing a report, discussing a company, or checking a claim, keep the calculation and its context together. A concise comparison can use this format:
- Company and reporting year: identify the issuer and the year covered.
- Reported ratio: give the ratio to one, such as 121:1.
- Inputs: show the CEO and median employee annual total compensation figures if disclosed.
- Population and measurement: state who was counted, the measurement date, and the method used to identify the median employee.
- Adjustments and caveats: note disclosed annualization, exclusions, estimates, assumptions, and any equity-valuation qualification.
- Comparability: say whether the other company used a sufficiently similar year, population, and approach for a direct comparison.
This keeps the arithmetic transparent and makes clear what the ratio can support. A result can summarize a disclosure accurately while still being an imperfect basis for ranking companies.
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Before publishing or repeating a comparison, check that the figures refer to the same reporting year where possible, that each numerator and denominator is an annual total compensation figure, and that the quotient is expressed consistently as a ratio to one. Then review each issuer’s explanation for workforce scope, measurement date, median-selection measure, annualization, exclusions, estimates, assumptions, and equity valuation. Note any differences that are material to the reader’s interpretation.
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If a filing reports a ratio but you cannot verify every input from the information at hand, you can still report the company’s stated ratio accurately. Be clear that it is the issuer-reported figure, do not present it as a calculation you independently reproduced, and do not fill in missing methodology details by assumption. If both companies’ disclosures leave an important point unresolved, say that the comparison has that limitation.
When the ratios are close, precision and rounding can matter to how they appear, but methodological differences may matter more. When the ratios are far apart, the difference still does not identify its cause on its own. In either case, the strongest presentation pairs the arithmetic with the facts that show what was counted and how the figures were assembled.
Frequently Asked Questions
How do you calculate the CEO pay ratio?
Divide the CEO’s annual total compensation by the median employee’s annual total compensation for the same reporting period. For example, $7,471,923 ÷ $61,782 is about 120.95, which rounds to 121:1.
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Look in the company’s proxy statement or annual meeting materials for a section titled “CEO Pay Ratio” or similar. The disclosure may include the reported ratio, the two compensation figures, and an explanation of how the company selected its median employee.
Are CEO pay ratios comparable between companies?
Not necessarily. Companies may differ in the employees included, measurement date, compensation measure used to identify the median, annualization, exclusions, estimates, assumptions, and compensation practices. Compare the same reporting year where possible and present those methodological differences alongside the ratios.
What does a ratio below 1:1 mean?
It means the company’s disclosed CEO annual total compensation was lower than the disclosed median employee annual total compensation under that company’s calculation. One 2025 proxy statement reported 0.77:1 for fiscal 2024; that example is not evidence that such ratios are typical.
Does the CEO pay ratio compare cash the CEO received with employee pay?
Not necessarily. The disclosed annual total compensation can include equity-award valuations, and a company cautioned that those values may not match the executive’s eventual economic benefit. Treat the ratio as a comparison of disclosed compensation figures, not automatically as cash received or realized equity value.
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No. Use the disclosed CEO annual total compensation and the median employee annual total compensation for the same period. Substituting salary alone for the CEO’s total mixes different measures and will not reproduce the disclosed ratio.
The Bottom Line
Calculate CEO annual total compensation divided by median employee annual total compensation for the same reporting year, then read the issuer’s methodology before comparing the result. A ratio such as 121:1 is a useful summary of disclosed figures, but workforce scope, median-selection methods, adjustments, and equity valuations can limit direct comparisons.
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